Our small cap telco Investment Vonex (ASX:VN8) has completed its acquisition of Queensland-based telco OntheNet.
OntheNet provides data network, voice and hosting/colocation services primarily to SMEs (small and medium enterprises).
The acquisition is projected to add ~$15M to VN8’s annual recurring revenue (ARR) which has now grown to ~$51M, and adds ~$2M in EBITDA for a total of ~$8.5M.
We like that the acquisition is “accretive” to VN8’s key financial metrics, including earnings per share (EPS), EBITDA and free-cash flow (FCF) on a full year pro forma basis. The chart below illustrates the new revenue mix following the acquisition.
VN8 has paid total consideration of approximately $9.8 million for OntheNet — $7.7M in cash and $1.9M in escrowed shares.
Our more in depth commentary on this acquisition can be found here - VN8 grows to $51M Annual Recurring Revenue with Latest Acquisition.
The OntheNet deal marks the fifth acquisition for VN8 since listing in 2018, helping propel ARR beyond $50M.
VN8 is following the tried and tested telco consolidation strategy to growth, by driving revenue through: acquisition, integration, and achieving economies of scale.
We track ARR as a metric as it is essentially the amount of revenue expected every year - providing a useful guide to the continual impact of acquisitions to the ongoing business.
On the management front, VN8 has announced the appointment of Stephe Wilks as Non-Executive Chair and Brent Paddon as Non-Executive Director. Both have extensive experience within the IT and telecommunications industries. In particular, Stephe was managing director of XYZed, an Optus company, where he developed and managed Australia’s first competitive broadband wholesaler is pertinent to VN8’s business.
Next up for VN8 will be to integrate OntheNet and report on its impact. Also on the horizon, we expect:
🔲 Completion of integration of Direct Business (2H22)
🔲 Further potential acquisitions (2H22-23)
🔲 Sustain cashflow positive quarters going forward (2H22)
🔲 EBITDA positive (2H22)
🔲 125k PBX users (4Q22 - 1H23)